U.S. ethanol producers, lawmaker blast EPA biofuels proposal

Sept 29 (Reuters) - Ethanol producers and a high-profile Midwest lawmaker on Friday said a proposal to tweak the U.S. renewable fuels program in a way that would count exports of the corn-based fuel against federal volumes mandates would hurt biofuel makers.

Making U.S. ethanol exports eligible under the 2005 Renewable Fuel Standard (RFS) would “essentially gut the program and should be stopped in its tracks,” said Senator Chuck Grassley, of top producing state Iowa.

The Environmental Protection Agency (EPA), which oversees the mandate to mix corn-based ethanol with nearly every gallon of gasoline consumed in the United States, was considering a modification that would allow ethanol exports to qualify for renewable fuel credits known as RINs, two sources familiar with the matter told Reuters.

The tweak would increase the pool of RINs available and likely lower costs for refiners such as Valero Energy and PBF Energy, which pay hundreds of millions annually to comply with the RFS.

“EPA is currently seeking input from all stakeholders involved. Nothing has been finalized at this time,” said spokeswoman Liz Bowman, declining to offer specifics.

The potential modification for ethanol requirements followed a separate proposal on Tuesday in which the EPA said it was considering further reductions in soy-based biodiesel blending.

President Donald Trump supported the ethanol industry during his 2016 campaign but also appointed Scott Pruitt, a critic of the renewable fuels program, to run the EPA.

“I’ll do all I can to see if this proposal is really moving forward, and if so, I’ll work to shut it down,” Grassley, who is also chairman of the Senate Judiciary Committee looking into Trump-Russia ties, said.

Brooke Coleman, executive director of the Advanced Biofuels Business Council, said making exports eligible for RINs “would strip the value of biofuel blending by flooding the market with worthless credits.”

Prices for RINs tumbled to the lowest levels since May as news of the proposal circulated on Thursday.

U.S. corn ethanol producers were more export dependent due to flattening domestic blending demand, which in 2018 should be about 15 billion gallons, according to EPA.

However, making ethanol exports eligible for a RINs credit could be seen as a subsidy, and international buyers may claim that such supplies were being sold below marginal costs. U.S. ethanol shipments to China plunged after the country in January hiked anti-dumping and anti-subsidy tariffs on U.S. exports. (Reporting by Michael Hirtzer in Chicago, Timothy Gardner in Washington, Jarrett Renshaw in New York and Richard Valdmanis in Boston; editing by Susan Thomas)